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billyjoebob 12/5/2012 | 12:55:03 AM
re: Application Killers But you $100K job depends on many more than just techies to pay the extra $10 a month. Lets put it this way - an article in Network World yesterday stated that IP traffic continues to rise but IP revenues are flat and cable companies are not growing at the rate they were. If traffic rises with no perceived revenue growth what incentive does the cable company have to add more, fancier equipement? They could just decide that at $X a month we have Y traffic so at $X+15 a monthy we have 85% of Y - and we don't need to buy new equipment and revenues go up? If that formula holds and there is no competitive pressure from DSL providers (dsl deployement is slowing as well) then your $100K job is at very high risk.

The point I have been trying to make for many months is simple - Internet Access does not make money. Running more services of this medium will not make it more profitable - it will make it less profitable. Until this is a metered, tariffed service it will remain unprofitable and the CMOs and RBOCs are coming to this conculsion. Using more bandwidth won't change their minds.
rjmcmahon 12/5/2012 | 12:54:59 AM
re: Application Killers Running more services of this medium will not make it more profitable - it will make it less profitable. Until this is a metered, tariffed service it will remain unprofitable and the CMOs and RBOCs are coming to this conculsion. Using more bandwidth won't change their minds.

This observation is spot on, except that the RBOCs have known this for a long time.

The model problem is that the RBOCs do not know how to make money providing bandwidth abundance. They have never worked in competitive marketplace where one must meet and exceed customer expectations and enable other business owners to make a living.

Instead, the RBOCs behave as tax collectors. Increasing taxes and monopolizing our communications infrastructure will never stimulate growth.

Just look to the business section of the SJ Mercury News to see our directions. That section should have articles discussing technology shows and innovations, but instead it has a front page article about an auto show in Detroit with no mention of fuel efficiencies. (And a big, 5.9 cent per minute, SBC, long distance adverstisment)
billyjoebob 12/5/2012 | 12:54:57 AM
re: Application Killers I think we agree - which frightens me :-)

RBOCs think like utilities - which they were for a very long time. That model provides a very simple business - cost + X%. RBOCs are fighting very hard in the state PUCs and the courts to radically change the charges assoicated with unbundling their local loops.

Much of this "Killer App" is - I believe an interesting waste of time. There will never be one killer app that makes the "Internet" a resource for every home. It will be all of the apps - all of the uses - all of the toys, games, reference materials and increasingly simple usage that will make the "Big I" a utility.

Somewhere in the world a community will begin to complain loudly to their local officals about how their Internet service is poor - or too expensive - or too limited or something - and the first regulatory requirements on internet access will be born - as were the regulatory requirements for phones and for electricity. Only then will RBOCs - as we know them - fully understand how the business model works.

BTW - how do you make money from providing bandwidth abundance?
cyber_techy 12/5/2012 | 12:54:48 AM
re: Application Killers BTW - how do you make money from providing bandwidth abundance?

You tell the stock market that the bandwidth utilization on the internet is going up by 1000% a year. That somehow drives up the stock price and available funds the SP has which can then use them to buy more equipment.

gbennett 12/5/2012 | 12:54:47 AM
re: Application Killers "Like many others, I am convinced that fiber has the potential to solve the delivery problem, but for whatever reasons, deployment of FTTx is not progressing enough. This is what I wanted to imply by downside."

And like you, I'd *love* to see universal FTTx deployment, but the business case is the killer.

Right now we (the industry) have adopted a three layer model for "the Internet"...

Layer 3: Application (or Content) Service Provider
Layer 2: Internet Service Provider
Layer 3: Bandwidth Provider

Allegedly the business case for ADSL deployment is marginal, certainly in the UK. So in the case of ADSL "broadband" the Bandwidth Provider makes a loss on that part of their business.

Most ISPs seem to make losses, but I'd certainly be grateful for feedback on this point.

At Layer 3 it's anyone's guess. I'm told that some ASPs are very profitable indeed, as are some CSPs (eg. porn sites, sadly).

So how do we re-jig the model so that Layer 3 companies can pass on some of the wealth to the Layer 2 and Layer 1 companies? Is there enough wealth to go around? In other words, is there enough profit in new Applications and Services to bring Layer 1 and 2 companies into profit?

One or two of you have suggested metered bandwidth. That makes sense in isolation, but it opens a can of worms as follows...

- If I'm going to be charged by my ISP for the bandwidth I use, I want an SLA.

- To provide the SLA costs the ISP money. So I end up paying an extra "tax" on my metered bandwidth, just so that I know that I'm getting the service.

- If we take this point to the extreme...what percentage of your telephone bill represents the cost to the Telco of measuring and generating the bill? If the Internet goes to a metered model, imagine the costs involved.

- Is any of this even possible? After all, we'd have to change the Internet from a best-effort to a "QoS capable" network. We know, for example, that DiffServ "works" on a limited scale. But it can't "work" in its current form in the Internet because there are no fundamental service quality definitions - all DiffServ behaviours are defined locally, and there are no inter-carrier protocols or architectures.

As a European I'm used to being governed, and so first instincts might be for me to say "let's write some regulations". But clearly the track record of regulation in this industry hasn't been a good one.

Having said that, there are examples in Sweden of widespread, public fibre deployments that are funded in part by local and central government. There's a techie at Telia who brags that he has 10Gbps to his apartment, and a GSR in his lounge (no need for a log fire in winter there :-)

The question remains...what will ordinary folks do with lots of bandwidth? And how does that bandwidth pay its way?

gbennett 12/5/2012 | 12:54:47 AM
re: Application Killers dwdm2,

Nothing sinister about the insignia. I just haven't nagged our MIS folks to change it yet - I will now you've mentioned it :-)
sealink 12/5/2012 | 12:54:46 AM
re: Application Killers I would think that the backbone provider should carefully provision the amount of bandwidth to the ISP in order to leave the customer with the right amount of bandwidth in order to prevent ordinary folks from being unable to afford too much bandwidth. Fiber to the curb can then be deployed with enough bandwidth for content based apps and so forth.
gbennett 12/5/2012 | 12:54:46 AM
re: Application Killers billyjoebob wrote:

"The most likely reaction to this strategy will be the cable companies imposing fees on types of traffic (such as streaming audio and video) or heavy traffic users."

"this strategy" being the widespread use of video streaming by un-metered broadband users.

Absolutely correct. In ADSL, for example, the link out of the back of the DSLAM (which is usually ATM today) typically runs at STM-1 (155Mbps). For the ADSL provider this is the most expensive link in the network, because there are so many of them. This is why a typical DSLAM is massively over-subscribed (publicly discussed ratios run from x20 to x100). And this is with an ADSL "broadband" service of only 512kbps downstream.

The ADSL assumption is still bursty traffic with the opportunity for massive statistical gain. As per-user bandwidth demand increases then the current design models will fail.

The ADSL providers are not making money from the rollout - they regard it as "strategic". So you can bet they can't justify upgrading that STM-1 if it gets congested.

In the UK, I'm not aware that ISP commit to bandwidth guarantees for ADSL services. Please give me a detailed link if know of one - I've spent a few minutes on my ISP's site and can't find anything.

gbennett 12/5/2012 | 12:54:44 AM
re: Application Killers sealink,

Easy to do if every connection is 64kbps (as in telephony), and the phone company has decades of experience to know the typical call duration.

But what's the "right" bandwidth for an Internet session? How bursty is this bandwidth?

The ISP will buy a given amount of bandwidth from the Bandwidth Provider, but then they have to get as many customers as possible onto that bandwidth in order to make money. To date, Inter applications have been "elastic" (they don't break if there's congestion, the user just has to wait longer). There's no direct incentive for an ISP to offer better performance to their users.

There's an indirect incentive - the user moves to another ISP :-) But what if the performance bottleneck was at the other end of the Internet session? Moving ISPs won't help.

billyjoebob 12/5/2012 | 12:54:41 AM
re: Application Killers "The question remains...what will ordinary folks do with lots of bandwidth? And how does that bandwidth pay its way?"

I suspect the answers are respectively:

"Don't know yet - but if I can get it without paying more thatGăÍs good"

It doesn't.

If you assume that the primary growth medium for traffic is consumer and not corporate then it has to be understood that the "Internet" is an entertainment medium, albeit an interactive one, but entertainment none the less. As such it will have a value ceiling where increases bring canceled subscriptions. Cable Television is a good model G㢠basic and advanced billing models to suit the budgets and tastes of a broad swath of their customers. Basic access to medium and advanced connections for dedicated online RPG gamers, streaming music and video and live porn aficionados.

The ASPs in question - your L3 examples - that are profitable will most likely be the Ebays, and Amazons who cater to buyers. Though they have carved a new delivery and sales tool from the "ether" (excuse me - it was just to ripe to pass up) those sales must be at the expense of brick and mortar stores - in effect it's not new business just recovered from other places. I think it unlikely that subscription based services will take significant root. Again online gaming provides insight G㢠highest growth rates and hottest selling online games are peer to peer or free server games. Xbox and PS2 will significantly impact this model and I would wager that Microsoft has a subscription pricing model waiting in the wings.

I firmly believe, though the belief will be painful, that until the ISPs and BW providers find a billing model that is sustainable we will not experience growth. If left as a competitive market then prices will fluctuate based on regional competitive conditions until consolidation permits stabilized pricing rather than protective or market share gain pricing.

If it is regulated (my guess is sometime in the next 10 year it will be) pricing will be fixed at a cost+X% and at that point growth will be slow, predictable and stodgy. It will be the end of dynamic innovation and reintroduce the "Telephone Company" supplier relationships. Those equipment manufactures with a significant installed base when regulations occur will be the winners. The rest will be gone or left to fighting over the scraps.

I think the history of the power industry and the telephone industry prior to regulation and post regulation must be understood and viewed as the most likely scenario for our future.
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